Control Accounts

There are only two control accounts in accounts. They are Debtors Control Account or Sales Ledger Control Account and Creditors Control account or Purchase ledger control account. They are independent accounts with no connection with double-entry. information is collected from various sources to prepare these two accounts. no cash sales or cash purchases and provision for bad debts included in them. some of the uses of preparing these two control accounts can be given as follows.

• when the trial balance disagrees, we refer first to the control accounts to trace the errors.
• for the preparation of the trial balance, you can copy the debtors' balance and creditors balance from them.
• the opening and closing balances of control accounts should be equal to the total of the schedule of balances of debtors and creditors ledger account balances.
• it is a part of internal control in operation.

Dishonoured cheques from the dishonoured cheque register or dishonoured cheques account found in the general ledger. Interest charged to debtors, Discount allowed bad debts, Sales returns from the general ledger. cheques or cash received from the cash book. sales returns form the sales return daybook. in case of contra, entries refer to the journal. purchases figure taken fro purchase day book and returns form the purchase returns day book. Cheques/cash paid to form cash book. discount received bill payable from the general ledger. make it a point cash sales and purchases or provision for bad debts should not be included in control accounts, it is a grave mistake if included. sometime debtor balances previously written off will be received later, such receipts are excluded from receipts from debtors as such receipts are not included as outstanding balance in the opening balance of the debtor's control account.

Advantages of Control Accounts

Why use the control accounts?

Provides a checking mechanism to detect errors and fraud at an early stage;

Removes bulky details from the general ledger;

Larger companies can set up accounting departments for specific areas;

Trial balance figures provide a summary of totals, rather than individual accounts;

Minimize the likelihood of fraud because different staff independently maintains control account records and subsidiary ledger.

Control Account and the Double Entry System

Businesses can use control accounts in two different ways:

They can be an integral part of a double-entry system. Businesses use General ledger to keep the debtors and creditors control accounts. They use personal accounts as subsidiary records for analysis only, and the Sales and Purchases Ledgers are memorandum books.

Businesses can also use control accounts to extract information from them. In this case, the subsidiary ledgers become a part of the double-entry system.